CFP- Level-1-IP (Global) Chapter 1-6 (India Specific)

Consolidation, Transmission and Lien Consolidation • Consolidation can be carried out only if the following conditions are met: • • Names of holders and holding pattern of investments is identical across all folios. • • Mode of holding is same across folios (joint/either or survivor.) • • Tax status of all investments is identical (NRE/Resident Indian/Corporate). • • Signature, address, PAN and social status of investors is same. Friday, 15 July 2022 Investment Planning & Asset Management

Transmission • Units of a mutual fund are transferred to a surviving member in case of an untimely demise of the first holder, it is known as ‘transmission’ of mutual funds. On the other hand, a ‘transfer’ is said to happen when all the unit holders are alive. But both words are often used interchangeably. The following paragraphs list the documents required for transmission under various situations: • a) In case of death of one or more unit holders: • • Letter from surviving unit holders to the Fund / AMC / RTA requesting for transmission of units, • • Death Certificate in original or photocopy duly notarized or attested by gazette officer or a bank manager, • • Bank Account Details of the new first unit holder as per Annexure 1 along with attestation by a bank branch manager or cancelled cheque bearing the account details and account holder’s name. • • Bank Account Details of the new first unit holder as per Annexure 1 along with attestation by a bank branch manager or cancelled cheque bearing the account details and account holders’ name. Friday, 15 July 2022 Investment Planning & Asset Management

Lien • Lien is the right given to the lender over a security to recover the money in case the credit given to the borrower is not repaid as per the terms agreed to. • In the case of loan against mutual funds, the lien is marked by the lender on the units offered as security. The lien is marked on the units and not on the amount. The value of units marked under lien can keep fluctuating. • Lien can also be marked in online mode. “For online marking of lien, the investor visits the financier’s web portal and provides consent to borrow against mutual fund units and the financier digitally submits the lien marking request against the said number of units in the investor’s folio. • After marking of lien, the lender will part with the loan amount with the investor. Friday, 15 July 2022 Investment Planning & Asset Management

Minors as Investors • Minors can invest in Mutual Funds through a guardian. The minor willing to invest in mutual funds can do so in his name and he will be first and sole holder in such a folio. • This means that there can be no joint holder in this fund. The guardian can be either of the parents or a court appointed legal guardian. • Minors can invest in Mutual Funds through a guardian. Friday, 15 July 2022 Investment Planning & Asset Management

Changes in investor status, residency status (NRI to RI, RI to NRI) Investor Status • Minor to Major • NRI to RI • RI to NRI • Change in Nomination (NRIs) Friday, 15 July 2022 Investment Planning & Asset Management

Electronic Payments • Electronic Clearing Service (ECS) Credit • National Electronic Funds Transfer (NEFT) System • Real Time Gross Settlement (RTGS) System Friday, 15 July 2022 Investment Planning & Asset Management

Corporate Actions • Dividends • Dividend Declaration Date , Record date, Ex Div date,Payment of dividend date • Stock Splits • Consolidation (Reverse Stock Split) • Bonus Issue • Rights issue Friday, 15 July 2022 Investment Planning & Asset Management

Buy-back, Delisting of Shares, Mergers & Acquisitions Buy Back of Shares Buy back • A buyback can be seen as a company’s method to invest by buying shares from other investors in the market. • Buybacks reduce the number of shares outstanding in the market to expand the business and grow or reduce its liability by paying back/reducing its borrowings or distributing to the shareholders. • Buyback of shares can be done only out of the reserves and surplus available with the company. The shares bought back are extinguished by the company within the stipulated time frame and that leads to a reduction in its share capital. • To be eligible for a share buyback, a company should not have defaulted on its payment of interest or principal on debentures/fixed deposits/any other borrowings, the redemption of preference shares, or payment of the dividend declared. Friday, 15 July 2022 Investment Planning & Asset Management

Buy-back, Delisting of Shares, Mergers & Acquisitions Buy Back of Shares • Delisting of Shares • Delisting of shares refers to the permanent removal of the shares of a company from being listed on a stock exchange. Delisting may be compulsory or voluntary. • In a compulsory delisting, the shares are delisted on account of non- compliance to regulations and the clauses of the listing agreement by the company. Involuntary delisting, the company chooses to get the shares delisted and go private. • No minority shareholder can be forced to exit at the time of delisting of shares from the stock exchanges. Post delisting, any such shareholder would continue to be a shareholder in an unlisted business Friday, 15 July 2022 Investment Planning & Asset Management

Buy-back, Delisting of Shares, Mergers & Acquisitions Buy Back of Shares • Mergers & Acquisitions • Mergers and acquisitions are corporate actions that result in a change in the ownership structure of the companies involved. • In a merger, the acquirer buys up the shares of the target company and it is absorbed into the acquiring company and ceases to exist. • For example, Microsoft and Skype, Walmart and Flipkart, Vodafone, and Idea, etc. • The assets and liabilities of the target company are taken over by the acquirer. In an acquisition or takeover, the acquiring company acquires all or a substantial portion of the stock of the target company. • Other examples, Sun Pharma’s acquisition of Ranbaxy, Disney's acquisition of 21 Century Fox, Amazon’s acquisition of Whole Foods, etc. Friday, 15 July 2022 Investment Planning & Asset Management

Direct Investing • A client who has fair knowledge of the products and skills required to operate in their respective markets may be equipped to make direct investment. • However, mere possession of knowledge and skills may not be enough and a client may avail the services of professionals to make investments, e.g. by way of managed portfolios, mutual funds, collective investment schemes, etc. • There is a sea change in the India marketplace over the last couple of decades from the days of holding and transacting in paper form (physical certificate) various investment products/avenues such as equity shares, bonds and mutual fund products. Friday, 15 July 2022 Investment Planning & Asset Management

Risk Management System in the Secondary Market • There are risks at multiple levels when investing in stock markets. There may be company level risk, sector risk, operational risk, etc. In short, a risk is the probability of losing money while dealing in stock markets. Broadly, the investment risk is classified in two categories: • Systematic risk: The variability in a security's returns that is directly associated with the overall movements in the general market or economy is called systematic risk. It is a non-diversified portion of the risk also known as market risk. All securities have systematic risk whether it is bonds or stocks because systematic risk directly encompasses interest rate, market, and inflation risks. • Unsystematic risk: The risk is specific to a particular company or security such as business risk, financial risk, liquidity risk, etc. This type of risk can be diversified. • Total risk: Systemic risk plus unsystematic risk on an investment. Every investment has systemic risk (any risk carried by an entire class of assets and/or liabilities) and unsystematic risk (any risks unique to the investment). Friday, 15 July 2022 Investment Planning & Asset Management

Risk Management System in the Secondary Market • A sound risk management system is integral to an efficient clearing and settlement system. • The clearing corporation ensures that trading members’ obligations are commensurate with their net worth. • It has put in place a comprehensive risk management system, which is constantly monitored and upgraded to prevent market failures. • It monitors the track record and performance of members in terms of their net worth, positions, and exposure with the market, collects margins. Friday, 15 July 2022 Investment Planning & Asset Management

Risk Management System in the Secondary Market • Thus, a multiplicity of risks may arise as follows: • Capital Adequacy • Margins and Settlement Guarantee Mechanism • While the stock exchanges provide the platform for trading, the clearing corporation determines the funds and securities obligations of the trading members and ensures that the trade is settled through the exchange of obligations. The role of each of these entities is explained below: • Clearing Corporation • Clearing Members • Custodians • Clearing Banks • Depositories • Professional Clearing members Friday, 15 July 2022 Investment Planning & Asset Management

Risk Management System in the Secondary Market • Online Monitoring and Inspection of books • Online Position Monitoring System (OPMS) is the online position monitoring system that keeps track of all trades executed for a trading member vis-a-vis its capital adequacy. The system also tracks online real-time client-level portfolio base upfront margining and monitoring. • The SEBI Act empowers the regulator to conduct inspection of any book, register or other documents and records of any listed company if it has reasonable grounds to believe that the company has been indulging in insider trading or fraudulent and unfair trade practices relating to securities markets. Friday, 15 July 2022 Investment Planning & Asset Management

Mutual Funds • We have covered Mutual Funds in detail in Global syllabus Friday, 15 July 2022 Investment Planning & Asset Management

Portfolio Management Schemes Registration requirement of Portfolio Manager • SEBI in their Portfolio Manager Regulations, 2020 defines a portfolio manager as being a body corporate, whether as a discretionary portfolio manager or otherwise, advises or directs or undertakes on behalf of the client the management or administration of a portfolio of securities or goods or funds of the client, as the case may be. • This arrangement is strictly pursuant to a contract with a client. • SEBI in the said regulations prescribe that a portfolio manager, a body corporate besides meeting a fit and proper person and other due diligence norms should have the necessary infrastructure and manpower to effectively conduct its activities as a portfolio manager Friday, 15 July 2022 Investment Planning & Asset Management

Responsibilities of Portfolio Manager • Agreement • Disclosure • Discretionary and Non-discretionary portfolio manager • Minimum amount • Segregation of funds • Investment restrictions • Other important factors Friday, 15 July 2022 Investment Planning & Asset Management

Various costs - fixed, performance-based; High watermark, Hurdle rate, Catch-up • The portfolio managers have an annual fixed charge of between 2% and 2.5% of the average assets under management as a recurring annual basis • Most portfolio managers however have a “hurdle rate” concept, say a 10% hurdle rate over and above which the variable fees gets triggered and calculated. In the above case discussed, 10% hurdle rate would mean 10 lakh earned by the client on Rs 1 crore invested. The remaining 20 lakh would qualify for variable fees, which at 25% would amount to Rs 5 lakh. This is the condition of “no catch-up”. • There is another variant of “partial catch-up”, where the hurdle rate is fixed along with two rates of variable fees, one for not hitting the hurdle rate, say 15%, and another for hitting the hurdle rate, say 25%. Friday, 15 July 2022 Investment Planning & Asset Management

Various costs - fixed, performance-based; High watermark, Hurdle rate, Catch-up • We observe that in a “full catch-up”, the portfolio manager is rewarded for whatever performance; • in a “no catch-up” only after the hurdle rate is hit and that too, over the hurdle rate of performance only; and in a “partial catch-up” less for the gains below the hurdle rate, but rewarded nonetheless. • There is another concept of “high watermark” also when determining the variable fees payable. • A “high watermark” is the higher of • corpus investment value at the start of the period (usually annual), or • (ii) Highest Net Assets at which the fees has been paid during the period. For instance, considering annual periods basis for variable fees, if a client’s base investment of Rs 1 crore rises to Rs 1.30 crore at the end of 1 year, a pre-set percentage of variable fees is triggered for the Rs 30 lakh return. If the value of investments drops to Rs 1.20 crore at the end of second year, there is obviously no variable fees. • However, if at the end of third year the portfolio value stands at Rs 1.50 crore, the variable fees get triggered for Rs 20 lakh (over the high watermark achieved earlier of Rs 1.30 core) • The “high watermark” can also be combined with hurdle rate, and therefore with “no catch-up” variant. For instance, a portfolio manager may charge variable fees of 20% on all returns in excess of 10% hurdle rate on “no catch-up” basis subject to a high watermark annually. Friday, 15 July 2022 Investment Planning & Asset Management

Alternative Investment Funds Role of Alternative Investment in Portfolio Management • SEBI notified on 21st May 2012 their regulations related to the Alternative Investment Funds (AIF). • This would include any fund established or incorporated in India in the form of a trust, or a company, or a limited liability partnership, or a body corporate, and which would be a privately pooled investment vehicle that collects funds from investors, whether Indian or foreign, for investing them in accordance with a defined investment policy for the benefit of its investors. • AIFs would exclude mutual funds established under SEBI (Mutual Funds) Regulations, 1996. It would also exclude any scheme registered with SEBI under the Collective Investment Schemes Regulations, 1999, or for that matter under any other regulations of SEBI to regulate fund management activities. Friday, 15 July 2022 Investment Planning & Asset Management

Alternative Investment Funds Role of Alternative Investment in Portfolio Management • Eligibility Criteria for AIFs is minimum corpus of Rs 20 crore for each scheme and Rs10 crore for Angel Funds. • Investors in AIFs can be Resident Indian, NRI or foreign nationals with minimum investment by each investor being Rs 1 crore. • Alternative investments include private equity or venture capital, hedge funds, managed futures, art and antiques, commodities, and derivatives contracts. • Real estate is also often classified as an alternative investment. Friday, 15 July 2022 Investment Planning & Asset Management

Evolution and Growth of AIFs in India • The number of AIFs in FY14 was relatively small at 6 and 13, respectively, for category I and II. Investments raised by AIFs reached around Rs 2 lakh crore by September 2020. • As the industry matured, 11 and 49 such schemes were launched in FY18 • The industry has grown at a compounded annual growth of over 74% between 2014 and 2020. During this period, however, the commitments for investments reached Rs 4 lakh crore, a CAGR of 65% during the same period. Friday, 15 July 2022 Investment Planning & Asset Management

SEBI Requirements on performance disclosure • Chapter IV of the AIF Regulations provides for general obligations, responsibilities and transparency requirements that are required to be complied by all AIFs. • Chapter IV provides for specific disclosure obligations on the AIF to the investors including conflict of interest, information on fund investments, fees, various risks, valuation, etc. • Further, AIFs, in addition to what is required under the AIF Regulations, may also provide for additional disclosures to investors in the placement memorandum in respect of fee and charges. Every AIF shall, in its placement memorandum, add by way of an annexure, a detailed tabular example of how the fees and charges shall be applicable to the investor including the distribution waterfall. • Additionally, they have to disclose information about litigations/pending disciplinary cases in respect of the AIF, sponsor, manager and their Directors/partners/promoters and associates, Trustees or Trustee Company and its directors. • The disciplinary history shall include outstanding/pending and past cases of litigations, criminal or civil prosecution, disputes, non-payment of statutory dues, over dues to/defaults against banks or financial institutions, contingent liabilities not provided for, proceedings initiated for economic offences or civil offences, adverse findings with respect to compliance with securities laws, penalties levied, disputed tax liabilities, etc. Further, any disciplinary action taken by SEBI or any other regulatory authority must be disclosed. Friday, 15 July 2022 Investment Planning & Asset Management

Distressed Securities • Investment characteristics • Distressed securities are the securities issued by a certain company which the company is finding difficult to services, viz. paying the due interest on the obligation and/or the return of capital borrowed. • A market disruption or adverse macroeconomic conditions, locally or globally, may impact the credit profile of a distressed entity. • It may happen as well that the situation has got nothing to with market conditions. Usually these are companies that are companies close to bankruptcy. • These companies need a lifeline to revive. Friday, 15 July 2022 Investment Planning & Asset Management

Role in Investor Portfolios • The distressed assets may present a market opportunity for the risk- seeking investors to make huge returns, especially if the subject company belongs to a certain sector that is currently facing headwinds, which may be temporary in nature but has already debilitated some companies’ financials beyond repair. • Such market disruptions are real opportunities for investors who have the required risk appetite. • Asset Reconstruction Companies specialize in evaluating such scenarios from a techno-legal angle as well as completing the financial due diligence for the stakes to change hands. • The following modus operandi may be adopted to resolve a tricky non- performing asset, though there can be many variants depending on the actual stage a company nurses. Friday, 15 July 2022 Investment Planning & Asset Management

Role in Investor Portfolios • Distressed investments are usually ‘standalone’ financial engineering opportunities, with low correlation with equity or debt markets. So, this asset class can be a great diversification strategy for evolved investors. • Hedge funds have a flavour for distressed assets as do Category II Alternative Investment Funds. • The approach is institutional as there are various facets to address during the phase of investment, negotiation, resolution and even staking in the turnaround of the underlying asset Friday, 15 July 2022 Investment Planning & Asset Management

• Chapter-3 is completed here • Thank you very much Friday, 15 July 2022 Investment Planning & Asset Management

Chapter-4 Small Savings Schemes and Instruments with Sovereign Guarantee • Learning Objectives • Understand the features of various Government sponsored schemes for the general public • Differentiate the factors that make these schemes viable to certain investor profile • Identify specific goals of general public that are fulfilled by small savings schemes Friday, 15 July 2022 Investment Planning & Asset Management

Public Provident Fund • The Public Provident Fund (PPF) scheme was instituted by the Public Provident Fund Act, 1968 to provide an investment avenue to the general public. • There is sovereign guarantee to all subscriptions and interest accrued or credited to PPF accounts. • The amount standing to the credit of any subscriber in the PPF account shall not be liable to attachment under any decree or order of any court in respect of any debt or liability incurred by the subscriber. • The government via a notification dated December 12, 2019 replaced the Public Provident Fund Scheme, 1968 with Public Provident Fund Scheme, 2019 Friday, 15 July 2022 Investment Planning & Asset Management

Public Provident Fund • The account can be opened and operated at a post office or any public sector bank or select private sector banks. • The online facility is also available in certain banks to open and operate a PPF account. • A person can open only one PPF account. However, a person can contribute subscriptions to accounts opened in the name of minor children, or other minor/s for whom she/he is legal guardian, as well as in the name of spouse. • There is no age limit prescribed for opening a PPF account. The subscription to a PPF account can be made up to the maximum limit prescribed (currently Rs 1,50,000) in a financial year. Friday, 15 July 2022 Investment Planning & Asset Management

Public Provident Fund • The PPF account cannot be opened in joint names. A nomination can be made. • A PPF account cannot be opened by a Hindu Undivided Family (HUF). It can neither be opened nor operated by a power of attorney holder. • It cannot be opened by a non-Resident Indian (NRI). However, an NRI is allowed to continue investing in his/her PPF account, which was opened while he/she was a Resident of India, but only till the account’s initial maturity. The account in such cases cannot be extended. • The NRI however has the option to prematurely close the account after 5 financial years from the end date of the financial year in which the account was opened. In case of premature closure, the account will earn 1% less interest than the prescribed PPF interest rate per financial year. Friday, 15 July 2022 Investment Planning & Asset Management

Public Provident Fund • PPF account is for an initial term of 15 years, which is counted from the end of the financial year in which the account is opened. For instance, an account opened on 3rd May, 2020 shall have first financial year ending on 31st March 2021. The account will mature on 1st April, 2036. Therefore, if annual subscriptions are only made in each financial year in a PPF account right up to its initial maturity, it can take 16 subscriptions • Taxation is EEE • A PPF account can be extended after its initial maturity for a 5-year block, there being no limit on the number of such extensions back-to-back. Such extension terms can be with or without subscription. If an option is not exercised within a year after the initial maturity of an account, it is deemed to be extended without subscription. • In cases of extension without subscription, any amount outstanding in the account can be withdrawn by the subscriber, but only once during a financial year. The account will continue to normally earn PPF interest. In case of extension with subscription, the withdrawal rule is 60% of the amount outstanding prior to the extension being granted, but only once in a financial year during the 5- year extension block. • The PPF account offers loan facility which is available from the 3rd financial year (from the financial year in which the account is opened) up to the end of 6th financial year. The loan amount can be a maximum of 25% of the amount outstanding at the end of the 2nd year immediately preceding the loan application year. The loan has to be repaid in 36 equal monthly instalments at a nominal interest rate which is 1% p.a. of the loan amount. Friday, 15 July 2022 Investment Planning & Asset Management

Public Provident Fund • A partial withdrawal from the PPF account is permissible. However, such partial withdrawals can be made from the 7th financial year (end of the six years from the end date of financial year in which the account is opened). • The admissible partial withdrawal is equal to 50% of the amount that stood in the account at the end of 4th year preceding the year in which the amount is withdrawn or the end of the preceding year whichever is lower. Friday, 15 July 2022 Investment Planning & Asset Management

Sukanya Samriddhi Yojana • The Sukanya Samriddhi Yojana was notified by a Central Government gazette notification dated 2nd December 2014. • The Sukanya Samriddhi account may be opened by the natural or legal guardian in the name of a girl child from the birth of the girl child till she attains the age of 10 years. • Only one account can be opened in the name of a girl child in Post Office and branches of authorized banks. • Natural or legal guardian of a girl child shall be allowed to open the account for two girl children only, provided if the second childbirth results in twin girls, or the first childbirth itself results in three girls, the account can be opened for three girl children. Friday, 15 July 2022 Investment Planning & Asset Management

Sukanya Samriddhi Yojana • The account can be opened with a minimum of Rs. 250 and thereafter any amount in multiple of Rs. 100 can be deposited any number of times in a year up to a maximum of Rs. 1.50 lakh per account in a financial year. A minimum of Rs. 250 must be deposited in a financial year to sustain the account. Benefit under section 80C of the Income-tax Act, 1961 is available to a depositor (guardian of girl child/children). • On attaining age of 10 years, the account holder, that is the girl child, may operate the account herself, while deposit in the account may be made by the guardian or any other person or authority. • Deposits in an account may be made till completion of 14 years from the date of opening of the account. The account can be closed prematurely only in case of death of the account holder girl child, or only in cases of extreme compassionate ground such as medical support in life-threatening diseases, or where the Central Government is satisfied that operation or continuation of the account is causing undue hardship to the account holder. Friday, 15 July 2022 Investment Planning & Asset Management

Sukanya Samriddhi Yojana • The Sukanya Samriddhi account shall mature on completion of 21 years from the date of opening of account or on the marriage of account holder whichever is earlier. However, one withdrawal shall be allowed on attaining the age of 18 years of account holder girl child to meet education expenses up to 50 % of the balance at the credit of preceding financial year. • The interest rate on Sukanya Samriddhi accounts for the quarter June- Sept, 2021 is 7.6% p.a., the interest is credited at the end of a financial year and is compounded on annual basis Friday, 15 July 2022 Investment Planning & Asset Management

National Savings Certificates • All individuals, joint individuals and minors (supported by guardians) can invest in the certificates in multiples of Rs 100; the denominations available for investment are of Rs. 100, Rs. 500, Rs.1,000, Rs.5,000, Rs.10,000 • There is no upper limit for investment. • Hindu Undivided Families (HUFs), Non-resident Indians (NRIs), trusts and companies cannot invest in NSC-VIII series. • However, a resident who subsequently becomes NRI during the currency of the period of a certificate shall be allowed to avail the benefits of the certificate on maturity on a non-repatriation basis Friday, 15 July 2022 Investment Planning & Asset Management

National Savings Certificates • The interest rate valid on the date of purchase of a NSC-VIII series certificate remains valid until its term of 5 years to maturity. The interest rate applicable on accounts opened during the quarter June- Sept, 2021 is 6.8% p.a. compounded on half-yearly basis. • Thus the annual effective rate of interest comes to 6.92%. There is no option under NSE-VIII series to get pay-out before the maturity date. Thus, there is no regular or annual/semi-annual interest pay-out. • The NSE-VIII series is eligible for section 80C benefit in the financial year of purchase. • The interest accrued in individual financial years is taxable. However, a unique aspect of the NSE-VIII series certificates is that such accrued interest in the first four financial years of purchase is deemed to be reinvested, and thus qualifies for tax benefit under section 80C in those respective financial years. Friday, 15 July 2022 Investment Planning & Asset Management

Kisan Vikas Patra • The Kisan Vikas Patra (KVP), a saving instrument for individual savers distributed through post offices, was launched by the Central Government on 1st April, 1988. The unique feature of this scheme is to double the money invested in a certain period • The operating features of KVP mostly correspond with those of NSC-VIII series certificates with respect to eligible investors, holding basis, nomination, transfer and pledge. It is also issued in electronic form with effect from 1st July, 2016. • For investments exceeding Rs. 10 lakh in KVPs, one needs to also submit evidence of income. It is now also mandatory to submit Aadhaar number towards proof of identity. • KVP is not eligible for tax benefits. The interest rate applicable on accounts opened during the quarter June-Sept, 2021 is 6.9% p.a. Thus, KVPs can be purchased with a doubling period of 124 months. There is no tax deduction at source from maturity proceeds. KVP certificate can be used as collateral or security to avail secured loans. Friday, 15 July 2022 Investment Planning & Asset Management

Post Office Monthly Income Scheme • The Post Office Monthly Income Scheme (POMIS) is a saving product for individuals singly and jointly up to three individuals, and for minors above 10 years of age. • Minor after attaining majority has to apply for conversion of the account in his/her name. • The maximum amount that can be invested by an individual is Rs. 4.5 lakh. However, joint accounts are capped at Rs. 9 lakh. • The share of an individual cannot exceed Rs. 4.5 lakh including his/her share in joint account. • Each joint holder has an equal share in a joint account. Single account can be converted into joint and vice versa. • Any number of accounts can be opened in any post office subject to aggregate investment limited to Rs. 4.5 Lakh across all such accounts Friday, 15 July 2022 Investment Planning & Asset Management

Post Office Monthly Income Scheme • The tenure of the scheme is 5 years from the date of opening the account with a post office. • The interest rate as on 1st July, 2021 is 6.6% p.a. The account can be closed prematurely but after a lock-in period of one year. The premature closure of account before 3 years attracts a deduction of 2% of the deposit amount. • The same is 1% of the deposit amount after completion of 3 years from the date of opening of the account Friday, 15 July 2022 Investment Planning & Asset Management

Senior Citizens Savings Scheme • The Senior Citizens Savings Scheme (SCSS) can be applied by a resident individual of age 60 years or more in post offices as well as authorized commercial banks across India. • Individuals of age 55 years or more who retire on superannuation or under an approved voluntary retirement scheme can also open a SCSS account, provided the account is opened within one month of receipt of retirement benefits and the amount sought to be deposited in the account is not in excess of such retirement benefits received. • A retired person of Defence Services can open an SCSS account on completing 50 years of age. HUFs and NRIs are not allowed to invest in this scheme. • The maximum amount that an individual can deposit in the account is Rs. 15 lakh (in multiples of Rs. 1,000). Friday, 15 July 2022 Investment Planning & Asset Management

Senior Citizens Savings Scheme • The joint account can be opened with spouse only, provided the first holder in a joint account is the investor himself/herself. • However, it is possible that two separate accounts can be opened by an individual and spouse, each with a maximum limit of Rs. 15 lakh. Thus, an individual and spouse can invest cumulatively Rs. 30 lakh in SCSS accounts. • The Rs. 15 lakh in each account can be invested jointly as well; one account where the individual is first holder, and the second where his/her spouse is first holder. • The rate of interest effective 1st July, 2021 is 7.4% p.a., payable on quarterly calendar intervals. • The account has tenure of 5 years. It can be extended for a further term of 3 years but by due application within a year from the date of initial maturity. The amount of interest received under SCSS is taxable at individual’s slab rate. • TDS is deducted at source on interest if the interest amount is more than Rs 50,000 in a financial year. Tax benefit of up to Rs.1.5 lakh amount deposited can be claimed under Section 80C of the Income-tax Act, 1961. Friday, 15 July 2022 Investment Planning & Asset Management

Sovereign Gold Bonds • The Sovereign Gold Bonds (SGBs) are issued by the Reserve Bank of India on behalf of the Government of India • The eligible investors are individuals, HUFs, trusts, universities and charitable institutions. Individual investors with subsequent change in residential status from resident to non-resident may continue to hold SGBs till early redemption/maturity • SGBs are issued in denominations of one gram of gold and in multiples thereof. Minimum investment is one gram, and maximum is 4 kg for individuals/HUFs and 20 kg for trusts and similar entities. This annual ceiling will include bonds subscribed under different tranches during initial issuance and those purchased from the secondary market. Friday, 15 July 2022 Investment Planning & Asset Management

Sovereign Gold Bonds • They are tradable, and can be bought in the secondary market as well. The issue price is linked to the average of 3 days’ price of gold of 0.999 purity (24 carat) published by India Bullion and jewellers’ Association Ltd. (IBJA). • The interest at 2.5% p.a. is paid on the nominal value of SGB, payable on half-yearly intervals. The interest is credited semi-annually to the investor's linked bank account. The last interest will be payable on maturity along with the principal value of SGBs. • The interest thus received is taxable as income from other sources at the slab rate applicable to an individual. However, this is not subject to TDS. The tenure of each SGB series is 8 years • SGBs carry 2.5% interest. There is ‘nil’ capital gains in case they are held to maturity, against 20% long-term capital gains tax (for holding period above 3 years) in case of physical holding and Gold ETFs. SGBs can be easily used as collateral for loans which is not available in case of Gold ETFs, while other form of physical gold may require expensive value assessment. • The sovereign guarantee, ease of holding and disposal, tradability are other obvious advantages of investing through SGB. Friday, 15 July 2022 Investment Planning & Asset Management

• Chapter-4 Ends here Friday, 15 July 2022 Investment Planning & Asset Management

Chapter- 5 Investing in Fixed income securities • Learning Objectives • Understand the ecosystem of fixed-income investments and the role of debt markets to finance Government and the Corporate • Understand demand side and supply side players in debt market and the typical debt instruments • Attribute the performance of various debt instruments in client portfolios Friday, 15 July 2022 Investment Planning & Asset Management

Introduction • The fixed-income instrument market is typically very large world over in comparison to other instruments such as equity. • They play a critical role in financing the governments as well as large corporate. • The debt instruments play a critical role in determining the supply of money in the market and are used by the central banks in their monetary policy determinations. • The debt instruments are variously affected by the interest rate risk in the economy and other specifically related risks such as credit risk of the issuers. • They cumulatively present a formidable asset class to diversify portfolios and address liquidity and income flows Friday, 15 July 2022 Investment Planning & Asset Management

Role of Debt Markets in India in financing Government and the Corporate • Corporates use both equity and debt, depending on their preference, cost, etc. • Government however, issues bonds only, as there is no concept of “Government equity”. • Broadly three categories of Issuers hit the debt market for raising resources: Sovereign Public sector agencies / companies or financial institutions, Private sector. • The distinction between these three types of issuers is in terms of ownership and hence the extent of safety or implied safety from the credit risks perspective. Friday, 15 July 2022 Investment Planning & Asset Management